Going South?

By William Davis

Know what’s interesting about BB&T Corporation? A few things maybe. For one, the bank was founded in the aftermath of the Civil War, in a North Carolina backwater called Wilson. For another, the company’s 1903 Branch Banking and Trust Building in Wilson was recently listed on the National Register of Historic Places. The clincher though? The “Branch” in “Branch Banking and Trust” is not what you’d easily assume for a lending institution. Turns out what became BB&T was launched in 1872 by one Alpheus Branch, who named his little merchant bank “Branch and Company” a few years later.

Know what’s interesting about SunTrust Banks, Inc.? A few things maybe. For one, the current brand’s most direct corporate ancestor is The Trust Company of Georgia, founded in 1891. The earliest predecessor of Sun Bank, on the other hand, is The People’s National Bank, a Florida corporation founded in 1911. Of some interest, the Sunshine State business went belly up during the Depression and reorganized on Valentine’s Day 1934 into the First National Bank of Orlando. The real sizzler though? One of Sun Trust’s vaults held fellow Atlanta resident Coca-Cola Co.’s most prized possession – the secret Coke formula – From 1925 to 2011.

Know what’s interesting about the BB&T and SunTrust merger announced last week? Uhhh…nothing maybe?

To be fair, the $28.2 billion deal will create the sixth-largest retail bank in the U.S. and will end a decade-long drought in big bank mergers. But the motivation for the deal was really just technology according to the rather tedious executives for the two companies. Pooling their resources will allow the companies to develop better digital offerings together than they could on their own, submit the gentlemen from the south, making the combined bank more attractive to potential customers. Wow. How non-electrifying.

To that dull point, BB&T’s CEO Kelly King – in what may be the least interesting quote in M&A history – suggests “The world is changing, and we have to change.” Wait…what? That’s it? The reanimated Mr. King, whose age by all appearance is somewhere between that of the Coke recipe and Alpheus Branch. will be the first CEO of the new firm. If the deal’s completed fast enough.

As clear indication that Mr. King’s “change” will not be positively exciting for everybody, both banks began calling their biggest clients and shareholders as soon as the deal was announced…to assure them it was positively exciting for everybody.

Fact is, the merger is hardly too thrilling for anybody, especially a good number of the companies’ employees. The blending of operations will likely lead to branch closures throughout the Southeast – the two banks reportedly have some 740 brick and mortar operations within two miles of each other.

The agreement will scrap both companies’ names and headquarters and create an altogether new bank based in Charlotte, North Carolina, home to Bank of America and a big chunk of Wells Fargo. The combined BB&T/SunTrust organization, which will be given a name – an exciting one no doubt – at a later date, will have almost 60,000 employees and about $440 billion in assets. Scale is everything they say. Maybe. But it’s not that interesting.

What the numbers are saying…

$26 billion.

Amount investors have pulled out of U.S. equities so far in 2019.

What folks who have multiple trading screens at their desk are saying…

“Momentum is a key component right now. A lot of people are jumping in to get on board.”

Paul Brigandi, managing director and head of trading at Direxion Investments

“Signs of economic stability in the U.S. are giving the more fundamental-based investors faith coming back into the market, which is then driving what technical traders are seeing on their screen.”

The NASDAQ has posted gains for seven straight weeks, climbing 15% over the stretch – the largest percentage rise for the tech-heavy index in that span since August 2009. The Russell 2000 has gained 17% over the same period, the best such gain the small-cap benchmark since December 2016.

26 of the 30 stocks in the Dow Jones Industrial Average and 465 of those in the S&P 500 have climbed this year. All 11 S&P 500 sectors are in the green for 2019.

On this day in 1971, the NASDAQ market opened for trading, as the National Association of Securities Dealers Automated Quotation system first displayed the median price for more than 2,500 “over-the-counter” securities. The NASDAQ Composite index was set at an initial value of 100. It closed Friday at 7,298.20.

The recent surge in Apple shares has pushed the company closer to regaining the title of world’s largest public company. At $807 billion, the iPhone maker trails Microsoft at $811 billion, but leads Amazon at $802 billion. Google is at $791 billion but set to fall following earnings.

Last week marked the anniversary of “Tulip mania” in the Netherlands. In 1637, the price of the rare Witte Croonen tulip bulb hit its peak, reaching 1,345 guilders per half-pound, up 2,506% in 33 days. Over the next five years, the bulbs lost an annual average of 76% of their value, until they fetched only 37.5 guilders in 1641.

What folks with an ear to the Street are saying…

“Investors buying bonds should start checking what their colleagues in the stock market are doing.”

Heard on the Street columnist Jon Sindreu

FABWC-012819

The views in this commentary are those of Fund Architects. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from Fund Architects or any other investment professional. The information contained within this commentary should not be the sole determining factor for making investment decisions. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, you are encouraged to consult with Fund Architects. Information pertaining to Fund Architects advisory operations, services, and fees is set forth in Fund Architect current disclosure statement, a copy of which is available upon request. Fund Architects, LLC is an SEC Registered Investment Advisory Firm.